Question 1: What are your thoughts on the Orica (ORI) share purchase plan (SPP)?
Answer: On the face of it, you would be mad not to participate in Orica’s share purchase plan. You won’t be paying any higher than $15.84 for the shares, while on the ASX, the shares are trading at $16.99. The SPP follows Orica’s purchase of US sodium cyanide producer Cyanco, for which it paid US$640m. This is being funded by an institutional placement of $400m at $15.84, this SPP which is capped at $65m, and debt and cash. The acquisition was well received by the market, with most seeing it as earnings accretive and strengthening Orica’s position in the global market for sodium cyanide to give it around 20% market share. Consequently, the institutional placement was well supported.
Overall, the brokers are positive on Orica with a consensus target price of $18.19. The range is from a low of $16.50 through to a high of $18.50. There are 4 “buy” recommendations and 2 “neutral” recommendations. They have it trading on a multiple about 18.1 times forecast earnings. If you don’t want to increase your exposure to Orica, you can always sell some shares on the ASX now and replace at cheaper price in the SPP. The latter is subject to a $30,000 cap, and if oversubscribed, may be scaled back. But I would be inclined to chance my arm in the SPP and increase exposure to Orica. It closes at 5.00pm on Monday 18 March.
Question 2: What do you think of the bid for Appen (APX)?
Answer: As I write this, it is important to understand that there is no bid (yet). Appen has received an indicative, conditional offer from Innodata, a NASDAQ listed AI firm. The indicative offer is an all script bid at an equivalent price of A$0.70 per share (in other words, A$0.70 of Innodata shares for each Appen share). If I was a shareholder in Appen, I would appreciate any offer. I would obviously prefer cash to script. Appen is currently trading above the script offer, which suggests that the market thinks this deal has some way to go yet …either another suitor or a much higher price in order to win Board support.
Question 3: Are the broking analysts bullish on Aristocrat Leisure (ALL)? What is their target price?
Answer: The broking analysts like Aristocrat Leisure with straight “buy” recommendations. However, they feel it is close to fully valued with a consensus target price of $47.20, about 0.8% higher than the last ASX price of $46.86. The range is a low of $44.80 through to a high of $52.70. The PE multiple of around 20 times forecast FY24 and FY25 earnings doesn’t look too demanding, but I some funds/investors won’t touch companies involved in the gaming industry and this tends to lower the multiple.
Question 4: Is there an ETF that focuses on robotics?
Answer: Global X has ROBO, ROBO Global Robotics and Automation ETF. It has a management fee of 0.69% pa and its 3 year return is 2.53%pa. Beta shares has RBTZ, the Betashares Global Robotics and Artificial Intelligence ETF. It has a management fee of 0.57% pa, and its 3 year return is 3.8% Like all thematic ETFs, it is really important to look “under the hood” and consider what index they are tracking and how it is constructed.
